As Jakarta’s skyline often vanishes under a shroud of haze, a quiet transformation is underway in the city’s commercial heart. Amid an oversupply of office space and declining occupancy rates, developers are turning to green-certified buildings to meet rising demand for sustainability, driven largely by multinational corporations adhering to strict environmental standards. This shift, while promising, is not without hurdles, as higher construction costs and tight market competition challenge the financial viability of eco-friendly infrastructure.
A recent report by property consultancy Colliers, published on March 3, revealed that only 46 office buildings in Greater Jakarta have earned green certifications such as Leadership in Energy and Environmental Design (LEED), Green Mark, and Greenship. These buildings, including notable structures like the World Trade Center and Capital Place, represent a small fraction of the city’s sprawling office stock. Yet, their occupancy rates are climbing, reaching 73.4 percent in the second half of 2024, according to Knight Frank, with average price growth of 4 percent year-on-year.
The Push for Sustainability
The demand for green offices is largely fueled by multinational companies mandated to operate in environmentally certified spaces. Ferry Salanto, senior associate director at Colliers, highlighted this trend in a statement to The Jakarta Post on March 12, noting that for many global firms, sustainability is a non-negotiable aspect of their operations. Bagus Adikusumo, head of office services at Colliers, echoed this sentiment, emphasizing that compliance with environmental, social, and governance (ESG) standards has shifted from a recommendation to a requirement. “Green buildings are no longer merely encouraged, but required” he told the Post, underscoring the growing corporate commitment to sustainability. 
This shift aligns with broader public awareness of environmental issues in Indonesia, a country grappling with severe air pollution and urban congestion. Images of Jakarta’s skyline cloaked in haze, such as those captured on June 24, 2023, serve as stark reminders of the city’s environmental challenges. For developers, green certification offers a way to differentiate their properties in a crowded market, attracting tenants who prioritize eco-friendly workspaces as part of their corporate ethos.
However, the transition to green infrastructure is not seamless. Developers face significant upfront costs for sustainable materials, energy-efficient systems, and certification processes. These expenses are often difficult to recoup in a market characterized by oversupply, where tenants hold strong bargaining power. Bagus noted that while green buildings should command higher rental rates due to their added value, competitive pressures keep prices lower than developers anticipate. “The tenants have greater bargaining power, making rents competitive” he explained, pointing to a disconnect between investment and return.
Market Dynamics: Oversupply and Declining Demand
Jakarta’s office market has been under strain for years, with cumulative supply surpassing 10 million square meters in 2024, according to Jones Lang LaSalle (JLL). Demand, however, has not kept pace, particularly since the COVID-19 pandemic reshaped workplace dynamics. Occupancy rates across the city average around 70 percent, a notable drop from the near-80 percent recorded in 2019. Grade A offices in Jakarta’s central business district (CBD) saw rental rates decline by 1.1 percent last year, while non-CBD offices experienced a slightly steeper drop of 1.9 percent, as per JLL’s findings.
The oversupply issue has forced developers to adapt. Many have paused new office projects, focusing instead on retrofitting existing properties to meet green standards, despite the additional costs. Buildings without such certifications are increasingly at a disadvantage, struggling to attract tenants in a market where sustainability is becoming a key differentiator. Yet, even green-certified offices are not immune to the broader market challenges, as demand growth continues to lag behind supply.
Syarifah Syaukat, senior research advisor at Knight Frank, acknowledged these difficulties but remained optimistic. Speaking to the Post on March 13, she pointed to a 7 percent increase in new green office stock over the past four years as evidence of growing adoption. “This growth aligns with public awareness of sustainability and global investors’ demand for ESG compliance” she said, suggesting that regulatory encouragement for energy efficiency and environmental management will further drive demand.
Financial and Technical Barriers
Retrofitting older buildings or constructing new green offices comes with significant financial and technical constraints. The higher investment required for sustainable design—whether through energy-efficient systems or eco-friendly materials—often clashes with the need to offer competitive rents. Christina Ng, head of facilities management at Colliers, highlighted a critical gap in market knowledge about funding options. “There is a regulation from the Financial Services Authority (OJK) to support environmentally friendly investment, yet the market still lacks understanding of how to access the green funding” she told the Post on March 13.
Ferry Salanto from Colliers suggested that green financing schemes, which offer incentives and lower interest rates, could ease the transition. Such mechanisms, if better understood and utilized, might help developers offset the initial costs of going green. However, without widespread awareness and streamlined access to these schemes, many in the sector remain hesitant to fully embrace sustainable practices.
A Global Context for Jakarta’s Green Shift
Jakarta’s push toward green offices mirrors a global trend, as cities worldwide grapple with balancing economic growth and environmental responsibility. Multinational corporations, often headquartered in regions with stringent ESG regulations, bring these expectations to emerging markets like Indonesia. Their demand for certified spaces is reshaping local real estate dynamics, compelling developers to align with international standards.
At the same time, Indonesia faces unique challenges. Rapid urbanization and industrial activity contribute to persistent environmental issues, from air pollution to waste management. Green buildings, while a step forward, represent only a small part of the broader sustainability puzzle. If Jakarta is to truly transform its urban landscape, complementary policies—such as stricter emissions controls and public transport investments—will be essential.
Economic Implications and Future Outlook
The economic implications of the green office trend are twofold. On one hand, it offers a potential lifeline for Jakarta’s oversupplied office market by creating a niche for eco-friendly spaces that appeal to high-value tenants. On the other hand, the financial burden of certification and retrofitting risks widening the gap between developers who can afford to invest in sustainability and those who cannot. If unaddressed, this disparity could exacerbate market imbalances, leaving smaller players at a disadvantage.
Bagus Adikusumo remains hopeful, predicting a return to a “golden age” for Jakarta’s office market once economic conditions improve and supply-demand dynamics stabilize. While such optimism is encouraging, it remains contingent on factors beyond developers’ control, including macroeconomic recovery and shifts in workplace strategies post-pandemic. For now, the green office sector must navigate a delicate balance between innovation and affordability.
Tenant Power and Market Adaptation
Tenants, particularly cost-conscious companies, continue to shape market trends. As JLL noted, many firms are prioritizing cost-saving measures and flexible workplace strategies, which often translate into downward pressure on rents. Landlords with lower occupancy rates are compelled to offer competitive pricing, even for green-certified buildings that carry higher operational value. This dynamic underscores the tenant-driven nature of Jakarta’s current office market, where sustainability is a selling point but not yet a guarantee of premium pricing.
Despite these challenges, the long-term outlook for green offices appears promising. As global and local awareness of environmental issues grows, demand for sustainable spaces is likely to increase. Regulatory support, such as OJK’s green investment frameworks, could further catalyze this shift if paired with education and outreach to industry stakeholders.
As Jakarta’s developers and tenants adapt to this evolving landscape, the city’s haze-shrouded skyline serves as a poignant backdrop. The rise of green offices offers a glimmer of hope for a more sustainable future, but questions linger about whether the market can sustain this momentum amid economic headwinds and structural challenges. For now, each new green-certified building stands as a testament to the possibility of change—one brick at a time.
